Management Decision and Control

Similar presentations

1 Management Decision and ControlThe specific objectives of this chapter are:PROVIDE comparative examples of decision making in different countries.PRESENT some of the major factors affecting the degree of decision-making authority given to overseas units.

2 Management Decision and ControlThe specific objectives of this chapter are:COMPARE and CONTRAST direct controls with indirect controls.DESCRIBE some of the major differences in the ways that MNCs control operations.DISCUSS some of the specific performance measures that are used to control international operations.

3 Decision and Control LinkagesDecision MakingThe process of choosing a course of action among alternatives.ControllingThe process of evaluating results in relation to plans or objectives and deciding what action, if any, to take.Management Decision and ControlThe choice of a course of action among alternatives and the evaluation of results of those choices in relation to plans or objectives.

4 Decision-Making Process and ChallengesComparative Examples of Decision MakingDo decision-making philosophies and practices differ from country to country?Some countries tend to use more centralized decision making than othersMost British organizations are highly decentralizedFrench managers graduated from the Grand Écoles and lack confidence in their middle managers so decision making tends to be centralized

5 Decision-Making Process and ChallengesComparative Examples of Decision MakingCodeterminationA legal system that requires workers and their managers to discuss major decisionsGerman MNCs tend to be fairly centralized, autocratic, and hierarchicalmanagers focus more on productivity and quality of goods and services than on managing subordinatesDecision making in Sweden is decentralized and participativeFocus more on quality of work life and the importance of the individual in the organization

6 Decision-Making Process and ChallengesComparative Examples of Decision MakingRingiseiA Japanese term that means “decision making by consensus.”Japanese consensus decision making can be very time-consumingIn practice most Japanese managers know how to respond to “suggestions” from the top and to act accordingly, saving much timeTatemaeA Japanese term that means “doing the right thing” according to the norm.HonneA Japanese term that means “what one really wants to do.”

7 Decision-Making Process and ChallengesComparative Examples of Decision MakingMNCs based in the United StatesUse fairly centralized decision making in managing their overseas unitsEnsure that all units are operating according to the overall strategic planThus providing necessary control for developing a worldwide strategyMost evidence indicates the overall decision-making approaches used around the world favors centralization

8 Centralization and Decentralization of Decision Making in Subsidiary OperationsAdapted from Table 11–1: Factors That Influence Centralization or Decentralization of Decision Making in Subsidiary Operations

9 Decision-Making Process and ChallengesTotal Quality Management Decisions (TQM)An organizational strategy and the accompanying techniques that result in the delivery of high-quality products or services to customersTQM is critical to achieve world-class competitivenessManufacturing is a primary areaU.S. automakers have greatly improved the quality of their cars in recent yearsThe Japanese have continuously improved quality and thus still have the lead

10 Decision-Making Process and ChallengesTotal Quality Management Decisions (TQM)Many successful TQM techniques applied to manufacturingMNCs use TQM techniquesTailor output to customer needsRequire their suppliers use same approachConcurrent engineering/interfunctional teamsDesigners, engineers, production specialists, and customers work together to develop new productsEmpowerment

11 Decision-Making Process and ChallengesTotal Quality Management Decisions (TQM)Many successful TQM techniques applied to manufacturingRewards and RecognitionPay and benefit increases, merit pay, and discretionary bonusesPay-for-skills and knowledge plansPlaques, and public recognitionSuccess of rewards and recognition varies by countryU.S. workers may value individual recognitionJapanese do not like to be singled out for personal praise

12 The Emergence of New Beliefs Regarding QualityAdapted from Table 11–2: The Emergence of New Beliefs Regarding Quality

14 The Controlling ProcessThree common performance measures used to control subsidiaries are in the areas of finance, quality, and personnelFinancial performance is typically measured by profit and return on investmentQuality performance is often controlled through quality circlesPersonnel performance is typically judged through performance evaluation techniques

18 The Controlling ProcessMNCs experience many control problemsObjectives of the overseas operation may cause conflictObjectives of joint-venture partners and corporate management may not be in accordDegrees of experience and competence in planning vary widely among managers running the various overseas unitsBasic philosophic disagreements about objectives and policies of international operations may exist

19 The Controlling ProcessTypes of ControlInternal andExternal ControlMNC will focus on the things that it does bestManagement wants to ensure there is a market for the goods and services it offersFirst the company needs to find out what the customers want and be prepared to respond appropriatelyThis requires an external control focusInternal and external perspectives of control – one is often given more attention than the other.

20 The Impact of Internal and External-Oriented Cultures on the Control ProcessAdapted from Table 11–3: The Impact of Internal and External-Oriented Cultures on the Control Process

21 The Controlling ProcessTypes of ControlDirect ControlsThe use of face-to-face or personal meetings for the purpose of monitoring operationsInternational Telephone and Telegraph (ITT) holds monthly management meetings at its New York headquartersMeetings are run by the CEO of the companyReports are submitted by each ITT unit manager throughout the worldProblems are discussed, goals set, evaluations made, and actions taken to help the unit to improve its effectiveness

22 The Controlling ProcessTypes of ControlDirect ControlsOther examplesTop executives visit overseas affiliates or subsidiaries to learn firsthand the problems and challenges facing the unit and to offer assistanceBy determining who to send overseas to run the unit, MNCs can directly control how the operation will be runDesigning a structure that makes the unit highly responsive to home-office requests and communications ensures MNCs that all overseas operations are run in accord with central management’s desires

23 The Controlling ProcessTypes of ControlIndirect ControlsThe use of reports and other written forms of communication to control operations at subsidiariesFinancial statementsStatements prepared to meet the national accounting standards and procedures prescribed by the host countryStatements prepared to comply with the accounting principles and standards required by the home countryStatements prepared to meet the financial consolidation requirements of the home country

24 The Controlling ProcessApproaches to ControlSome Major DifferencesGreat BritainFinancial records sophisticated and heavily emphasizedTop management tend to focus attention on major problem areas and not get involved in specific, detailed matters of controlControl used more for general guidance than for surveillanceOperating units had a large amount of marketing autonomy

25 The Controlling ProcessApproaches to ControlSome Major DifferencesFranceFrench managers employed a control system that was closer to that of the Germans than to the British.Control was used more for surveillance than for guiding operationsThe process was centrally administeredThe French system was less systematic and sophisticated then the German’s

26 The Controlling ProcessApproaches to ControlSome Major DifferencesHow do U.S. MNCs differ from their European counterparts?U.S. firms tend to rely much more heavily on reports and other performance-related dataAmericans make greater use of output control – Europeans rely more heavily on behavioral controlControl in U.S. MNCs focuses more on the quantifiable, objective aspects of a foreign subsidiary – control in European MNCs tends to be used to measure more qualitative aspects

27 Planning and ControlAdapted from Table 11–4: Selected Beliefs Related to Planning and Control

28 Planning and ControlAdapted from Table 11–4: Selected Beliefs Related to Planning and Control

29 Control Techniques Financial PerformanceThe most important part of the ROI calculation is profits – can often be manipulated by managementThe amount of profit directly relates to how well or how poorly a unit is judged to perform – for example:Sometimes differences in tax rates can be used to maximize overall MNC profits

30 Control Techniques Financial PerformanceBottom-line (i.e., profit) performance of subsidiaries can be affected by a devaluation or revaluation of local currencyIf a country devalues its currency subsidiary export sales will increaseThe price of these goods will be lower for foreign buyers whose currencies now have greater purchasing powerIf the country revalues its currency export sales will declineThe price of goods for foreign buyers will rise since their currencies now have less purchasing power in the subsidiary’s country

31 Control Techniques Financial PerformanceDevaluation and revaluation of local currency are outside the control of the overseas unitA devaluation of the currency will increase the cost of imported materials and supplies for the subsidiaryA revaluation will decrease these costs because of the relative changes in the purchasing power of local currency

32 Control Techniques Quality PerformanceWhy are Japanese-made goods of higher quality than the goods of many other countries?Quality Control Circle (QCC)Japanese firms train their people carefullyStaying on the technological cutting edgeFocus on developing and bringing to market competitively priced goodsDesign, engineer, and supply people to ensure that the product can be produced at prices customers can bearFostering continuous cost-reduction efforts (kaizen)

33 Performance of Suppliers When Serving U. SPerformance of Suppliers When Serving U.S. and Japanese-Owned Auto PlantsAdapted from Table 11–5: Performance of Suppliers When Serving U.S. and Japanese-Owned Auto Plants

39 Seven Common Themes of Successful MNCsTop managers take their mission statements seriously and expect everyone else to do the sameSuccess attracts the best people and the best people sustain successThe top companies know precisely what they are looking forThese firms see career development as an investment – not a choreThese companies promote from within whenever possiblePerformance is rewardedThe firms are genuinely interested in what their employees think and measure work satisfaction often and thoroughly

40 CaseAir AsiaWhat opportunities exist in the Asia-Pacific region for the entrance of new low-fare airlines? How might demand for low-fare service differ in the Asia-Pacific region and in North America and Europe?Do governments pose a significant obstacle to the expansion of low-fare airlines in Asia?Compare AirAsia’s strategy with the strategies of Southwest and Ryanair. How is it similar to and different from the strategies of those carriers?Did Tony Fernandes weigh the range of political, economic, and operational risks when he took over AirAsia? What risks might he have overlooked?How would you describe Tony Fernandes’ entrepreneurial strategy?How should AirAsia respond to the challenges posed by (a) new low-fare carriers entering the Asian Marketplace and (b) low-fare strategies pursued by incumbent carriers?How do you think the Asian passenger air transport marketplace will shake out? What lessons can be drawn from the North American and European experience?